Satisficing – Definition

Cite this article as:"Satisficing – Definition," in The Business Professor, updated December 20, 2019, last accessed June 5, 2020, https://thebusinessprofessor.com/lesson/satisficing-definition/.

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Satisficing Definition

Satisficing is a strategy used in decision making with the aim of giving out a result that is good enough to tackle a situation, rather than the optimal solution. The strategy explores all the available options to get a more suitable solution. What satisficing does is to narrow down the scope of available options that have the possibility of achieving the desired outcomes.

It then sets aside those options that will require intensive efforts to achieve the results. Note that options that require maximum exertion necessitate the additional expenditure of resources, time, and energy. So, satisficing ensure that the expenditures are reasonable.

A Little More on What is Satisficing

Generally, decision making is an integral part of a business. So, it is the duty of the management to ensure that it practices effective decision-making strategies for a sound company. Having several alternatives when you only need one to solve a situation is not good for business.

Possible decisions are generally costly, time-consuming, and require double efforts. However, proper utilization can move the company forward. Management, therefore, needs to focus on making decisions that are good enough, to tackle a prevailing situation. By doing this, they will devote less time and resources to solve the problem. In other words, satisficing will help the management to make the best decision that will save on the resources, time, and energy.

In business, satisficing behavior is an alternative objective that businesses can use to maximize profits. It means that a business is generating sufficient profits able to make investors happy and maintain confidence in the management.

The Origin of Satisficing

A Noble-laureate who is also an American scientist known as Herbert A. Simon is the one who came up with the term ‘satisficing’ in 1956. The scientist used this term to try and explain decision-makers’ behavior under situations where it is difficult to determine an optimal decision. He believed that many natural problems are a result of a lack of information, which in turn hinders the optimization of mathematical procedures. In his observation, he came to the conclusion that decision-makers are capable of satisficing the following:

  • Finding the most favorable solutions for a less complex world
  • Finding acceptable solutions for a world that is more realistic

Note that these approaches do not dominate each other in any way. However, their coexistence has been there for a long time, especially in the management science world.

Simon came up with this concept to rationality claim that rational choice theory is a description that is not realistic, especially to human decision processes. So, for this reason, there was a need for psychological pragmatism.

How it Works (Example)

The theory of satisficing is important in areas such as artificial intelligence, economics, and sociology. For instance, the theory implies that when there are plenty of choices of products or services that customers need to choose from, they will go for that which is good enough. They will not opt for the best possible choice because it will require them to spend a lot of resources and efforts on it.

Example one

Also, let’s assume that a group takes a good number of hours trying to project a budget for the coming fiscal year. After so many hours of debating, they finally reach an agreement. However, one person comes in to question the accuracy of the projection. The group becomes upset with this person, not because the question is wrong.

The reason is that it took them time and energy to come up with the budget projection. So, they are not willing to go through that tiresome process again. Note that the budget they have may not be what they will come next year. However, since the majority of members are okay with the results, it means that the projection is satisfactory.

Example two

Let’s assume that there is an individual who is only out for a satisfactory retirement income. The person may not understand the level of wealth he requires to ensure a good enough salary. The reason is that there may be future price uncertainty, and so, deciding on a salary income that is enough for him maybe a challenge.

In this case, the person can only use the probability of his satisfactory to assess the outcome. If the person picks an outcome with a maximum chance of being good enough, then this person’s behavior is hypothetically indistinguishable. However, this is different from that person with optimal choices under particular conditions.

Satisficing Limitations

Satisficing has one limitation. That it is difficult to determine what satisfactory results are all about, and it is still not clear whether the results are different from the pursuit of optimal income.

Satisficers vs. Maximizers

There is a difference between satisficers and maximizers. Maximizers work towards making the best choices that are possible to achieve from the available options. For instance, they may invest, set prices, and even advertising in order to maximize profits.

There is a difference between satisficers and maximizers. Maximizers work towards making the best choices that are possible to achieve from the available options. For instance, they may invest, set prices, and even advertising in order to maximize profits.

For instance, management may have other objectives to achieve and, therefore, decide to sacrifice several short-run profits. It means that the management will now focus on maximizing long-run profits instead of short-term ones.

References for “Satisficing”

https://en.wikipedia.org/wiki/Satisficing

https://www.investopedia.com › Tech › Artificial Intelligence

www.businessdictionary.com/definition/satisficing.html

https://economictimes.indiatimes.com › Definitions › Economy

https://www.interaction-design.org/literature/topics/satisficing

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